British bonds surge even as Sunak warns of 'profound economic challenge'

Sunak viewed as steady hand as investors relieved ‘total chaos’ is over

Two-year yield fell by the most since 1993 after Sunak — a former chancellor who had issued a warning over Liz Truss’ 'fairytale' tax cuts — emerged as the winner in the race to succeed her.

UK bonds posted some of their biggest gains on record as investors bet incoming prime minister Rishi Sunak will turn the page on weeks of turmoil dogging British markets and restore credibility to economic policy making.

Short-dated notes led the rally with the two-year yield falling by the most since 1993 after Sunak — a former chancellor who had issued a warning over Liz Truss’ “fairytale” tax cuts — emerged as the winner in the race to succeed her. The gains were supercharged as traders pared bets on future rate hikes.